Hall v Tasmanian Sandstone Quarries Pty Ltd - [2005] SASC 79

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
HALL & ANOR v TASMANIAN SANDSTONE QUARRIES PTY LTD
Judgment of The Honourable Justice Besanko
8 March 2005
CORPORATIONS - VOLUNTARY ADMINISTRATION - ADMINISTRATOR - FUNCTIONS, POWERS, RIGHTS AND LIABILITIES
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PRACTICE UNDER RULES OF COURT - PLEADINGS
Appeal from Master's orders refusing to strike out plaintiff's claim under rr 3.01 and 46.18 of the Supreme Court Rules 1987 and ordering that defendants pay two thirds of plaintiff's costs - where defendants were administrators of a company - where business of company in administration sold to plaintiff - where plaintiff claimed defendants were liable for misleading and deceptive conduct pursuant to s 75B of the Trade Practices Act 1974 - where ss 443A and 443C of the Corporations Law 1989 limits the liability of an administrator in respect of company debts to certain categories of debt - whether ss 443A and 443C constitute a statutory bar to an action brought against an administrator under s 75B of the Trade Practices Act - whether Master erred in holding that the plaintiff's case was not so clearly untenable that it could not possibly succeed and therefore refusing to strike out the plaintiff's statement of claim - whether Master erred in his order as to costs - appeal dismissed.
Trade Practices Act 1974 (Cth) ss 52, 75B, 82; Corporations Law 1989 ss 9, 443A, 443C; Corporations Act 2001; Misrepresentation Act 1972; Supreme Court Rules 1987 rr 3.01, 46.18; Kerr on Receivers and Administrators (17th ed, 1989, Sweet and Maxwell); O'Donovan, Company Receivers and Administrators (Thomson Law Book Co); Blanchard and Gedeye, The Law of Company Receiverships in Australia and New Zealand (2nd ed, 1994, Butterworths), referred to.
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241; Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (Admin Appointed) & Anor (1996) 148 ALR 472; Southern Resources Ltd & Ors v Residues Treatment & Trading Co Ltd & Ors (1991) 56 SASR 455, considered.

HALL & ANOR v TASMANIAN SANDSTONE QUARRIES PTY LTD
[2005] SASC 79
Civil

BESANKO J: This is an appeal from orders made by a Master of this Court.
On 31^st March 2004 the plaintiff, Tasmanian Sandstone Quarries Pty Ltd, commenced an action in this Court against four defendants, Tasmanian Sandstone Pty Ltd (a company subject to a deed of company arrangement) Mark Christopher Hall, Andrew James Heard and Legalcom Pty Ltd. The plaintiff and the first defendant are companies incorporated in the State of South Australia. The second and third defendants, who are the appellants in this action, were appointed administrators of the first defendant on 24^th January 2000.
By an application filed on 27^th May 2004 the second and third defendants sought an order (relevantly) that the plaintiff’s claim against them be struck out pursuant to rr 3.01 and 46.18 of the Supreme Court Rules 1987. This order was sought in paragraph 3 of the application.
A Master of this Court heard the application on 1^st November 2004 and he delivered his decision on 22^nd November 2004. The Master said:
“It seems to me that, in such circumstances, the defendants are not able to discharge the onus cast by Rule 3.01(a). In such circumstances the defendant’s application fails its first grounds.”
The Master made the following orders (relevantly):
“1.That paragraph 3 of the application of the second and third defendants (document 5) be dismissed.
6.That the second and third defendants pay two thirds of the plaintiff’s costs of this application and order.”
The second and third defendants appeal against these two orders. The Master made other orders but they are not the subject of the appeal. I will continue to refer to the parties by the description they bear in the action. The test on an application to strike out a claim is well known. The defendant must show that the plaintiff’s claim is so clearly untenable that it cannot possibly succeed. The onus on a defendant is a heavy one. He must show that the claim is unarguable and it is not enough, for example, for the defendant to show that the plaintiff’s prospects of success are slim (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) AC 465; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241)
The facts
On an application of this nature I must assume that the plaintiff can make out the facts alleged in the Statement of Claim. What follows is taken from that document.
The second and third defendants were appointed administrators of the first defendant on 24^th January 2000 and thereafter acted as administrators of the first defendant and had control of its assets.
In March 2000 the second and third defendants entered into negotiations with the plaintiff to sell the quarry business of the first defendant to the plaintiff. The quarry business consisted of land, mining leases, plant and equipment and stock. Negotiations continued for some time and material relevant to the quarry business was given to the plaintiff by the second and third defendants. The plaintiff alleges that during the negotiations the second and third defendants made representations to the plaintiff about preserving the assets of the quarry business pending completion of a sale. A deed of company arrangement which referred to the sale of the quarry business to the plaintiff was executed on 20^th March 2000. The first, second and third defendants agreed to sell the quarry business to the plaintiff. The sale was completed but the plant and equipment were damaged. It is unnecessary to set out the details of how it is alleged that this came about. The plaintiff claims that the first defendant breached the sale agreement, made actionable misrepresentations under the Misrepresentation Act 1972 and, through the second and third defendants, engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (“TPA”). The liability of the second and third defendants is alleged to be based on s 75B of the TPA which provides as follows:
“(1) A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU or 75AYA, shall be read as a reference to a person who:
(a)     has aided, abetted, counselled or procured the contravention;
(b)     has induced, whether by threats or promises or otherwise, the contravention;
(c)     has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d)     has conspired with others to effect the contravention.”
The plaintiff claims damages against the second and third defendants. The sum claimed is substantial.
The decision not to strike out the plaintiff’s claim
The second and third defendants submit that the statutory regime contained in part 5.3A, Division 9 of the Corporations Law 1989 and in particular, ss 443A and 443C, constitutes a statutory bar to an action brought against an administrator under s 75B of the TPA. The provisions of the Corporations Act 2001 are in similar terms to those in the Law, and the argument before me proceeded on the basis that it matters not whether the provisions of the Law or the Act apply in relation to the plaintiff’s claim. I will proceed on that basis.
Section 443A of the Corporations Law provides:
“(1)The administrator of a company under administration is liable for debts he or she incurs, in the performance or exercise, or purported performance or exercise, of any of his or her functions and powers as administrator, for:
(a)     services rendered; or
(b)     goods bought; or
(c)     property hired, leased, used or occupied.
(2)Subsection (1) has effect despite any agreement to the contrary, but without prejudice to the administrator's rights against the company or anyone else.”
Section 443C of the Corporations Law further provides:
“The administrator of a company under administration is not liable for the company's debts except under this Subdivision.”
The second and third defendants’ submission is that by reason of these sections an administrator is only liable for debts in the circumstances set out in s 443A and by reason of s 443C he is not otherwise liable for the company’s debts or for damages incurred while acting on behalf of the company. It is submitted that the Master erred in concluding that there were no decided cases in relation to the issue raised by the second and third defendants and he erred in any event in applying this consideration (assuming it to be correct) as the test of whether or not he should strike out the plaintiff’s claim against the second and third defendants. The second and third defendants referred to the decision of Branson J in Molit (No 55) Pty Ltd v Lam Soon Australia Pty Ltd (Administrator Appointed) and Anor (1996) 148 ALR 472 (“Molit”) and cases which have followed that decision.
I do not think that the Master erred in concluding that there was no decided case in relation to the proposition advanced by the second and third defendants. The issue in Molit was different. The plaintiff in that case was relying on s 443A to attach liability to the administrator. It could only do that if the relevant liability was a “debt” within the terms of s 443A. It clearly was not as the claim was one for unliquidated damages. Whether an administrator was liable for unliquidated damages on a basis other than s 443A (eg., s 75B of the TPA) was not an issue in the case.
I do not think that the Master made the mistake of reasoning that because there was no decided case on point the application must fail. In the end, the second and third defendants’ submission raised questions of statutory construction and if the point was arguable having regard to the statutory provisions, it was not irrelevant for the Master to note that there were no decided cases on the point.
Even if there is an error in the Master’s reasoning, I think that his conclusion is correct. It is certainly arguable that ss 443A and 443C are directed to debts incurred while acting as administrators of the company and say nothing at all as to the liability of administrators for unliquidated damages based on a provision such as s 75B of the TPA. Neither party suggested that the plaintiff’s claim was not a claim for unliquidated damages. Furthermore, even if, contrary to my view, Molit stands for the proposition advanced by the second and third defendants, it is not a decision which I am bound to follow.
I do not need to finally decide the issue because the only question at this stage is whether the plaintiff’s claim is clearly untenable. However, there is force in the plaintiff’s submission that like a receiver and manager an administrator is an officer of the corporation (s 9 of the Corporations Law) and, like a receiver and manager, should be liable for the torts he commits, or the misleading and deceptive conduct he engages in while in his office (Kerr on Receivers and Administrators (17^th ed, 1989, Sweet and Maxwell) p 261; O’Donovan, Company Receivers and Administrators (Thomson Law Book Co) at [24.710]; Blanchard and Gedeye, The Law of Company Receiverships in Australia and New Zealand (2^nd ed, 1994, Butterworths) at [11.34]).
The plaintiff’s claim against the second and third defendants is not clearly untenable and the appeal, insofar as it challenges the Master’s decision not to strike out the plaintiff’s claim, must be dismissed.
The order in relation to costs
The Master made an order that the second and third defendants pay two-thirds of the plaintiff’s costs of the application and order. The second and third defendants submit that they were not given an opportunity to be heard on the question of costs and it appears that that submission is correct. They submit that the Master erred in awarding any costs to the plaintiff in circumstances in which there were a number of adjournments because the plaintiff was trying to deal with the criticisms of the Statement of Claim and because they were partially successful on the application in that the plaintiff was ordered to provide further and better material facts in relation to some paragraphs in the Statement of Claim.
The Master was ideally placed to make a judgment as to the appropriate order in relation to costs. He was aware of the extent to which the second and third defendants were successful and he was aware of and indeed set out in his reasons for judgment the events leading up to the argument on 1^st November 2004. Even though the second and third defendants were not heard on the costs order, to succeed on appeal they must show an error of the type required in the case of an appeal against a costs order (Southern Resources Ltd and Ors v Residues Treatment and Trading Co Ltd and Ors (1991) 56 SASR 455 at 480 – 481). No such error has been identified by the second and third defendants, and the appeal against the costs order must be dismissed.
Conclusion
For these reasons the appeal must be dismissed.